Wednesday, 28 November 2012

Beveridge would be saying 'It's the economy, stupid'



It was good to hear Jose Harris on Radio 4’s marathon programme on the welfare state yesterday morning.  She supervised the early stages of my PhD in 1977.  I was researching the origins of minimum wage legislation – not our current version but the Wages Boards which were introduced by the 1909 Trades Boards Act and abolished by the Conservative government in 1993.  Winston Churchill, as President of the Board of Trade, made the case for the 1909 legislation, saying, “It is a national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions”.

The campaigns leading to this first intervention by the State to secure a minimum level of wages were focused on women’s ‘sweated labour’ and were often dominated by the trade unions’ argument that men’s wages should be a ‘family wage’ which supported women in their role as wives and mothers. However, the most influential players at the time were in fact a small group of employers who firmly believed it was not in their own, nor in the wider society’s, interest to have large numbers of people living at subsistence level.  This was not so much because they feared social unrest but because they feared the long-term damage that subsistence wages and very poor working conditions were doing to society.  Low wages created an inefficient unhealthy workforce and unfair competition from employers who had no interest in the general modernisation of industry.

This group of mainly Quaker employers, led by George Cadbury and his newspaper the Daily News, won the argument against those who they saw as irresponsible ‘laissez faire’ employers whose actions might lead to short-term gains but which would be accompanied by increasing poverty and long-term economic disadvantage.

My thesis was that it was the influence of these employers that led to the State intervening to prevent unfettered economic forces from driving down wages to poverty levels.  And I thought of this when listening to the three hour programme on the welfare state yesterday morning.  It was admirable of the BBC to devote such time to the issue but – like almost all the current public debate on welfare reform – there was very little mention of what is arguably the most important one of Beveridge’s five pledges; the commitment to full employment. 

This commitment was crucial because without it the other four pledges become financially unsustainable.  Full employment requires the State to take responsibility for what kind of economy we have instead of leaving it to market forces. Beveridge recognised this and his 1944 report Full Employment in a Free Society proposed, as Jose Harris describes in her biography:

A totally new kind of annual budget, which would use taxation, borrowing and deficit-financing to determine the levels of public expenditure, business investment and consumer demand.

After more than 30 years of governments taking less and less responsibility for our economy, the viability of our welfare state is determined not by what we want for ourselves, our families, our communities, but by the demands of global capital which in pursuing the lowest production costs abdicates responsibility for the long-term social consequences of low waged, low tax, low regulation economies.   

It was the demands of global capital which created high levels of unemployment in areas previously dominated by industries which moved production elsewhere in pursuit of lower wages.  The same economic forces are leading to an increase in insecure, low paid work.   These are the factors which create long-term unemployment and reliance on benefits, not individual characteristics of ‘malingering’ and ‘dependency’.

Unfettered global economic forces particularly affect those who employers would not choose to employ unless there is a shortage of labour supply.  And it is therefore the behaviour of employers and investors that should be the focus of government policy, rather than the hounding of people who have no option but to depend on benefits for their survival.  

I think Beveridge, if he were alive today, would be pointing out that:

- high levels of secure employment, at wages sufficient to sustain a reasonable standard of living, are incompatible with the way our economy is currently configured
- a progressive taxation system is incompatible with both the economic reality of, and the ideology associated with, the requirements of global capital
- it is these factors which make a welfare state, based on universal principles which delivers social and economic rights, economically unviable (not the creation of a ‘dependency culture’).

Or to paraphrase an American president he would be saying ‘It’s the economy, stupid’, not the welfare state that’s the problem.

Most crucially, I think he would be demanding that we recognise, confront and reform the dysfunctional ways in which our economy is currently configured, and that he would insist that such a challenge is necessary if we are to have a society which supports people when they need it, rather than the ‘sink or swim’ kind of society which we are rapidly becoming.

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